Tutor-Saliba Corporation, A California Corporation - Page 9




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          any hypothetical underpayments of tax and receives interest from            
          the Government on any hypothetical overpayments of tax.                     
               If an amount of revenue or cost attributable to a completed            
          long-term contract is properly taken into account in a                      
          postcompletion year, section 460(b)(1)(B) requires a taxpayer to            
          reapply the look-back method in that postcompletion year unless             
          the taxpayer elects otherwise.  For this purpose, section                   
          460(b)(2) requires a taxpayer to discount the amount of revenue             
          or cost to its present value as of the contract’s completion date           
          and to redetermine the contract’s “actual contract price”.                  
               Promulgated in October 1990, section 1.460-6(c)(2)(vi),                
          Income Tax Regs., 55 Fed. Reg. 41665-01 (Oct. 15, 1990),                    
          provides:                                                                   
                    (vi) Amount treated as contract price--(A) General                
               rule.  The amount that is treated as total contract                    
               price for purposes of applying the percentage of                       
               completion method and reapplying the percentage of                     
               completion method under the look-back method under Step                
               One includes all amounts that the taxpayer expects to                  
               receive from the customer.  Thus, amounts are treated                  
               as part of the contract price as soon as it is                         
               reasonably estimated that they will be received, even                  
               if the all-events test has not yet been met.                           
                    (B) Contingencies.  Any amounts related to                        
               contingent rights or obligations, such as incentive                    
               fees or amounts in dispute, are not separated from the                 
               contract and accounted for under a non-long-term                       
               contract method of accounting, notwithstanding any                     
               provision in � 1.451-3(b)(2)(ii), (iii), (iv), and �                   
               1.451-3(d)(2), (3), and (4), to the contrary.  Instead,                
               those amounts are treated as part of the total contract                
               price in applying the percentage of completion method                  
               and the look-back method.  For example, if an incentive                
               fee under a contract to manufacture a satellite is                     





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